Laying down the Law

Recently Bill Barlow wrote an excellent piece in the Harvard Law Record, recommending law students go into corporate law so they could donate money to charity. Sima Atri wrote a response, to which Jeff Kaufman wrote a convincing rebuttal. I’m going to address one very small part of Atri’s article, which to be fair she probably didn’t put much thought into.

Because if you choose to go into Big Law and care about the poor and otherwise marginalized, giving your money to charity is the least you can do. I say this because you are not choosing to go into neutral, apolitical, work. None of us working in the legal profession are. Your firm, Bill, has represented JPMorgan Chase, a bank that backed thousands of predatory and racist loans and helped create the foreclosure crisis.

I think this attack on Bill’s firm is almost impressive in how mistaken it is. Specifically, I think
1) The banks were not at fault for what it did
2) What it did was not predatory
3) What it did was not racist
4) Even if 1,2,3) are all wrong, it’s still good to represent banks.
This is a lot to show, so lets begin.

1) The banks were not at fault.

Yes, banks lent to many poor people: subprime lending. But in part this was because the government forced them to make these loans, in an attempt to promote home-ownership. If anyone if to blame, it is the government, not the banks. Left to themselves, the banks would have preferred not to lend to such people, as they present higher risks. So it’s strange to blame the banks for this, who had little choice in the matter. The high default rates among minorities during the crisis was the result of government intervention, not the fault of the banks.

2) The banks were not predatory

Given 1), the worst we can really accuse the banks of is “only following orders” or being involuntarily predatory. But even this isn’t the case. Banks didn’t force anyone to borrow money. Having the opportunity to take out a loan is a benefit – it’s the reason we try to maintain good credit scores! As Arnold Kling noted, borrowers get a free option on rising house prices. Being given the option to borrow money is a good thing – you’re not taking advantage of people by giving them choices. (And stories about people not understanding that their repayments rates would rise don’t work, as the defaults frequently happened among people still paying the introductory rate.

Indeed, one part of the crisis was the so called ‘NINJA’ loans, where borrowers frequently defrauded the banks. It is hard to see how the banks can be taking advantage of people by being defrauded.

3) The banks were not racist

Indeed, JPMorgan Chase made many loans to minorities. As we noted in 1), left to their own devises, banks apparently made too few loans to minorities – they were accused of being racist for refusing to lend money. This was why the Community Reinvestment Act was passed. So it seems very strange to accuse them of being racist for making too many loans to minorities as well. Maybe it’s just impossible to win.

4) Even if 1,2,3) are all wrong, it’s still good to represent the banks.

Ok, so suppose 1),2) and 3) are all false; the banks are truly evil companies. Is it therefore bad to defend them in court? Well, the adversarial court system depends on their being lawyers available to defend the guilty. The ACLU often defends extremely unpopular causes, because it is in these cases that harmful precedents are most likely to be created. In the same way that anti-terrorist laws, originally aimed only at extremely dangerous and unpopular people are now being abused in much more mundane situations, so too will the extraordinary legal steps being used against the big banks one day be used against other targets.

I realize that this was just a small part of Atri’s article. But it’s worth commenting on anyway.

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